John Connally Goes Belly Up After Betting Big on a Texas Oil Economy That Ran Out of Gas

John Connally was—and perhaps still is—the quintessential Texan, the embodiment of every 10-gallon myth associated with the Lone Star State. Tall and ruggedly handsome, he was plugged into the commodities—oil and gas, cattle and land—that made Texas hum. He and his wife, Nellie (the former "Bluebonnet Belle" at their alma mater, the University of Texas), enjoyed the fabled life of the Texas rich in four luxurious art-filled homes in Houston, Austin, South Padre Island and Floresville. He was tough, too. Like many of his tycoon brethren, Connally had scraped his way up from poverty—his daddy was a tenant farmer. It didn't hurt that his friend and mentor in politics was Lyndon B. Johnson.

There were setbacks along the way, which Connally met head-on, like an Old West marshall in a tumbleweed town. Notably, there was the day in 1963, forever etched in American memory, when he was shot in the chest, Connally leg and wrist by John F. Kennedy's assassin—a day the can-do Texan not only survived but used to vault himself into national politics.

The news from Texas is that "Big John" Connally, 70, has sustained a serious wound of a different sort, and will be forced yet again to dip into his famous stores of resiliency. On July 31 in Austin, the former Texas Governor and U.S. Treasury Secretary filed for both personal and partnership bankruptcy, claiming debts, mostly related to ventures in real estate, in excess of $170 million. "It's the hardest thing I've ever had to do," said Connally, who has sought the bankruptcy court's permission to auction off his assets to partially satisfy his creditors. "I regret that acquisitions of a lifetime must now be lost. But I willingly sacrifice them in an attempt to repay those who had faith and confidence in me."

How did Connally get into such a fix? Part of his problem may have been that as the epitome of the Texas myth, he was endowed with a certain swaggering self-confidence that no harm could befall him. As a leading Democrat, he risked political suicide by supporting Nixon for President and was rewarded with the job of Treasury Secretary in 1971. (Two years later he switched allegiance to the Republican party.) He escaped unscathed from a 1974 scandal, in which he was ultimately acquitted on five counts of accepting money from the Associated Milk Producers Inc. in exchange for favors from President Nixon. In 1980 he endured an embarrassingly unsuccessful campaign for the Republican presidential nomination, in which he collected exactly one delegate.

That same year Connally and his protégé, former Lieutenant Governor Ben Barnes—at 6'3", another bigger-than-life Texas individualist—became major players in the Texas economy. Their timing seemed perfect, thanks to the oil crisis of the '70s, which would drive the price of crude to a heady $40 a barrel.

Connally's political stature gave him easy access to bank loans, and he borrowed heavily. He and Barnes invested in an oil company, an air charter service, a business newspaper and several smaller ventures, including a barbecue restaurant. But they made their biggest bets on real estate, building condos, a 14-story office tower and shopping centers all over the state. At one point the partnership's assets were worth a dizzying $300 million.

But disaster struck when the price of oil plummeted, dropping to less than $10 a barrel. The bankers who had loaned money to businesses using oil reserves as collateral called in their notes. Real estate projects built in hopes of new Texas residents stood empty. Bankruptcy became ubiquitous throughout the state. (Some jokester circulated a bumper sticker reading "Chapter 11 in '87.") The little guys fell first. Then came such giants as the Hunt brothers and oil man Clint Murchison Jr.—and now Big John Connally. His situation is all the more desperate because his business was not incorporated, leaving his personal wealth exposed to creditors—and there are plenty of them.

"I'll have to start making a living now," he said after his announcement. "Any fees or money that I earn now will not be subject to the debt. I can go to legal work. I can put deals together. I can do a lot of things. You won't see me at the food-stamp line."

Under bankruptcy law, all that is safe from Connally's creditors is his Floresville ranch house and 200 acres. "I know what it is to be poor," he said. "It's not a new experience for me. It's not one I would have wanted to relive. But I am fully capable of it. Nellie and I both are." Connally, no doubt, faces hard times, but handkerchiefs are remaining in pockets throughout the Lone Star State, where the smart money says that Big John will be back in the saddle in no time.